You are allowed a deduction for income attributable to domestic production activities. You can deduct 6% of the lesser of your qualified production activities income or your taxable income (adjusted gross income for individuals) for the tax year. Your deduction is limited to 50% of the Form W-2 wages you paid for the tax year that are properly allocable to domestic production gross receipts.

The excess of your domestic production gross receipts for the tax year over the sum of your cost of goods sold and other expenses, losses, or deductions (other than the domestic production activities deduction) allocable to such receipts is your qualified production activities income. This income is determined on an item-by-item basis.

Domestic production gross receipts include gross receipts from any lease, rental, license, sale, exchange, or other disposition of tangible personal property which was manufactured, produced, grown, or extracted by you in whole or in significant part within the United States.

Domestic production gross receipts do not include gross receipts from the following activities.

The lease, license, or rental of property by you for use by any related person.

The lease, license, rental, sale, exchange, or other disposition of land.

See Internal Revenue Code section 199(c)(7) for the definition of related person.

If you receive a patronage dividend or qualified per-unit retain allocation from a cooperative which is engaged in the manufacturing, production, growth, or extraction in whole or in significant part of any agricultural or horticultural product or in the marketing of agricultural or horticultural products, your income from the cooperative can give rise to a domestic production activities deduction. This deduction amount is reported on Form 1099-PATR, box 6. In order for you to qualify for the deduction, the cooperative is required to send you a written notice designating your portion of the domestic production activities deduction.